Chart of the Day

A Week to Remember

January 27, 2017

It’s been a memorable first week of the Trump presidency. He will be meeting today with British Prime Minister Theresa May, who hopes to make giant strides in securing a bilateral trade accord between the two countries. Mexican President Nieto cancelled his trip to Washington amid mounting tensions over immigration, trade, and who pays for the wall. Putin and Trump plan a phone conference tomorrow. There’s been no apparent progress among Republican lawmakers toward a repeal and replace plan on the Affordable Health Care law. Bold initiatives have been undertaken on social policy and to roll back EPA restrictions. U.S. stock prices hit record highs, with the Dow crossing 20K and the S&P penetrating through the 2300 level. One week is completed, 207 remain — a long time for so frenetic a pace.

The dollar advanced overnight by 0.4% against the yen, 0.2% versus sterling, and almost 1% against the Turkish lira. But the greenback also fell 0.3% against the kiwi, 0.2% relative to the euro and Aussie dollar, and 0.1% vis-a-vis the loonie and Aussie dollar.

The ten-year JGB yield, which the BOJ is targeting at around zero, remains elevated at 0.07% after touching 0.085% yesterday. The central bank board meets early next week in a scheduled policy review that will unveil revised forecasts.

Gold and oil sank 0.6% and 0.7% to $1,183.30 per ounce and $53.38 per barrel.

Many Asian stock markets were closed for the start of the Chinese Lunar New Year holiday. Japan’s Nikkei rose 0.3%, while equities in Australia and India gained 0.8% and 0.6%. But the direction in European bourses has been down, with losses so far of 2.8% in Greece, 0.6% in Italy, Spain and France, 0.4% in Switzerland and 0.2% in Germany. The British Ftse is flat.

Japanese CPI inflation remains lackluster. Core, which excludes fresh food and is targeted at 2.0%, posted an average drop in 2016 of 0.3%, the most deflation since 2011, and the December-over-December change was -0.2% despite a month-on-month energy price rise of 1.3%. Tokyo core consumer prices fell by 0.3% in the year to January.

A number of European countries reported sentiment indices:

Finnish consumer confidence climbed 1.5 points to a reading of 21.0 in January, most since February 2011. Manufacturing confidence reached its best level in Finland since June of that year.

French consumer confidence in January rose to its long-term average for the first time since late 2007, but business sentiment in France settled back to a reading of 104 after spiking upward by 3 points to 105 in December.

Economic sentiment in Italy increased 2.3 points to a score of 102.5 in January, but consumer sentiment dropped 2.1 points to 108.8.

Australian producer prices last quarter were 0.5% higher than in 3Q and 0.7% above their year-earlier level. That on-year pace was up from 0.5% in the third quarter but still well below 1.9% registered in the final quarter of 2015. In 4Q16, import prices fell 0.6% on quarter and 3.6% on year.

German import prices leaped 1.9% in the final month of 2016, producing the greatest on-year rise, 3.5%, since February 2013. As recently as July, import prices had been 3.8% below their year-earlier level, and the average 3.1% drop in full-2016 constituted a 7-year low. German export prices rose 0.4% in December and 1.1% from a year earlier.

M3 money in the euro area was 5.0% higher than a year earlier in December. There was a 4.8% increase between the final quarters of 2015 and 2016, down from a 5.0% increase in the previous year to 4Q15. One bright spot was an accelerated 2.3% on-year rise in bank lending to non-financial firms from 2.1% in both October and November and 0.3% in the year to December of 2015.

Swedish retail sales rose 0.6% on month and 0.9% on year in December versus a 3.3% average advance in calendar 2016. Finnish retail sales fell 0.6% in December.

The first estimate of U.S. fourth-quarter real GDP growth, just 1.9% at a seasonally adjusted annualized rate from 3Q, came in a bit below expectations and well below the 3.5% pace in the third quarter. That was the fourth sub-2.0% growth rate in the last five quarters and resulted in a 1.6% average growth rate for 2016, which was down from 2.6% in 2015 and 2.4% in 2014. Net exports exerted a 1.7 percentage point drag on the fourth-quarter growth rate. President Trump has made an improved trade balance a top economic policy goal of his administration.

U.S. durable goods orders sank 0.4% in December. After having plunged 4.8% in November, investors were anticipating a good-sized rebound.

Investors appeared willing to turn on a dime this past week. Money flows into U.S. stock funds for the week ended Jan. 25 show how quickly investors can change their minds on bets that economic growth and corporate profits will get a boost under the Trump administration. Some $2.2 billion in new money poured into […]

Next Week

January 27, 2017

Central Banks: The first of eight scheduled FOMC meetings is on Tuesday and Wednesday and will not be associated with a published Summary of Economic Projections or a press conference by Chair Yellen. A policy meeting at the Bank of Japan on Monday-Tuesday will be associated with a released “Outlook” including revised macroeconomic forecast and a press conference by Governor Kuroda. Likewise, the Bank of England Monetary Policy Committee will release its quarterly Inflation Report on Thursday at the time when it reveal its monetary policy decisions. Governor Carney will hold a press conference. Other countries with interest rate meetings next week are Thailand, the Czech Republic and Russia. Bank of Canada Governor Poloz, Chicago Fed President Evans and Reserve Bank of Australia Assistant Governor DeBelle speak publicly.

Australia and New Zealand: New Zealand quarterly labor statistics. New Zealand and Australian trade balances. Australian business confidence, consumer sentiment, and building permits. New Zealand M3 money growth and Australian private sector credit growth.

South Africa and Turkey: South African and Turkish trade balances. South African money and credit growth. Turkish consumer and producer prices.

Germany called on the European Union on Friday to speed deals to open trade with a dozen or more countries, mainly in Asia, and to boost support for free trade around the world in response to scepticism about it from new U.S. President Donald Trump.

In a paper presented to EU finance ministers at a meeting in Brussels and seen by Reuters, the bloc’s leading economic power repeated its view that Trump, along with Britain leaving the EU, posed risks for the world economy. The Union must bolster common policies such as in defense, diplomacy and the economy, it said.

It should also “give a timely push against protectionism and for free trading relationships and international cooperation”, the paper continued, referring indirectly to Trump’s scepticism on trade agreements.

In his first week in office, he signed an order pulling the United States out of the multilateral Trans-Pacific Partnership with Asian states.

Listing 12 countries, mainly in Asia, that are at varying stages of talks with Brussels, where the EU executive runs trade policy, the German paper said: “The Commission should seize the initiative now to make decisive progress in these negotiations.”

It noted potential deals with: Indonesia, the Philippines, Malaysia, India, China, Vietnam, Singapore, Japan, Thailand, Myanmar, Australia and New Zealand. It also noted that talks dating back some 20 years with the six Arab countries of the Gulf Cooperation Council had lately shown little progress.